FIRST DIVISION

[G. R. No. 130972. January 23, 2002]

PHILIPPINE LAWIN BUS, CO., MASTER TOURS & TRAVEL CORP., MARCIANO TAN, ISIDRO
TAN, ESTEBAN TAN and HENRY TAN, petitioners, vs. COURT OF APPEALS and ADVANCE
CAPITAL CORPORATION,respondents.

DECISION
PARDO, J.:

The Case

The case is a petition for review via certiorari of the decision of the Court of Appeals, [1] reversing that of
the trial court[2] and sentencing petitioners as follows:

WHEREFORE, the appealed decision should be, as it is hereby REVERSED and SET ASIDE. In lieu thereof, a
new one is hereby rendered ordering thedefendants-appellees to pay, jointly and solidarily, in favor of plaintiff-
appellant Advance Capital Corporation, the following amounts:

1. P16,484,994.42, the principal obligation under the two promissory note Nos. 003 and 00037 plus interest and
penalties;

2. P100,000.00 for loss of goodwill and good reputation;

3. An amount equivalent to 10% of the collectible amount, plus P50,000, as acceptance fee and P500 per
appearance, as and for attorneys fees: and

4. P100,000 as litigation expenses.

Costs shall be taxed against defendant-appellees.

SO ORDERED.[3]

The Facts

The facts, as found by the Court of Appeals, are as follows:

On 7 August 1990 plaintiff Advance Capital Corporation, a licensed lending investor, extended a loan to
defendant Philippine Lawin Bus Company (hereafter referred to as LAWIN), in the amount of P8,000,000.00
payable within a period of one (1) year, as evidenced by a Credit Agreement (Exhibits B to B-4-B). The
defendant, through Marciano Tan, its Executive Vice President, executed Promissory Note No. 003, for the
amount of P8,000,000.00 (Exhs. C to C-1).
To guarantee payment of the loan, defendant Lawin executed in favor of plaintiff the following documents: (1)
A Deed of Chattel Mortgage wherein 9 units of buses were constituted as collaterals (Exhibits F to F-7): (2) A
joint and several UNDERTAKING of defendant Master Tours and Travel Corporation dated 07 August 1990,
signed by Isidro Tan and Marciano Tan (Exhs. H to H-1): and (3) A joint and several UNDERTAKING dated 21
August 1990, executed and signed by Esteban, Isidro, Marciano and Henry, all surnamed Tan (Exhs. I to I-6).

Out of the P8,000,000.00 loan, P1,800,000.00 was paid. Thus, on 02 November 1990, defendant Bus Company
was able to avail an additional loan of P2,000,000.00 for one (1) month under Promissory Note 00028 (Exhs. J-
J-1).

Defendant LAWIN failed to pay the aforementioned promissory note and the same was renewed on 03
December 1990 to become due on or before 01 February 1991, under Promissory Note 00037 (Exh. K).

On 15 May 1991 for failure to pay the two promissory notes, defendant LAWIN was granted a loan re-
structuring for two (2) months to mature on 31 July 1991.

Despite the restructuring, defendant LAWIN failed to pay. Thus, plaintiff foreclosed the mortgaged buses and as
the sole bidder thereof, the amount of P2,000,000.00 was accepted by the deputy sheriff conducting the sale and
credited to the account of defendant LAWIN.

Thereafter, on 27 May 1992, identical demand letters were sent to the defendants to pay their obligation (Exhs.
X to CC). Despite repeated demands, the defendants failed to pay their indebtedness which totaled of
P16,484,992.42 as of 31 July 1992 (Exhs. DD-DD-1).

Thus, the suit for sum of money, wherein the plaintiff prays that defendants solidarily pay plaintiff as of July 31,
1992 the sum of (a) P16,484,994.12 as principal obligation under the two promissory notes Nos. 003 and 00037,
plus interests and penalties: (b) P300,000.00 for loss of good will and good business reputation: (c) attorneys
fees amounting to P100,000.00 as acceptance fee and a sum equivalent to 10% of the collectible amount, and
P500.00 as appearance fee; (d) P200,000.00 as litigation expenses; (e) exemplary damages in an amount to be
awarded at the courts discretion; and (f) the costs.

On 04 September 1993, a writ of preliminary injunction was issued with respect to movable and immovable
properties of the defendants.

In answer to the complaint, defendants-appellees assert by way of special and affirmative defense, that there
was already an arrangement as to the full settlement of the loan obligation by way of:

17.A. Sale of the nine (9) units passenger buses the proceeds of which will be credited against the loan amount
as full payment thereof; or in the alternative.

17.B. Plaintiff will shoulder and bear the cost of rehabilitating the buses, with the amount thereof to be included
in the total obligation of defendant Lawin and the bus operated, with the earnings thereof to be applied to the
loan obligation of defendant Lawin. (p. 4 Answer; p. 166, rec.)

Defendants further assert that the foreclosure sale was in violation of the aforequoted arrangement and prayed
for the nullification of the same and the dismissal of the complaint.[4]

On 28 June 1995, the trial court rendered a decision dismissing the complaint, as follows:

WHEREFORE, judgment is rendered as follows:

1. Dismissing the complaint for lack of merit;

2. Declaring the foreclosure and auction sale null and void;

3. Declaring the obligation or indebtedness of defendants EXTINGUISHED;

4. Declaring the writ of attachment issued in this case null and void and, therefore, is hereby declared dissolved;
and

5. Ordering the Sheriff of this Branch or whoever is in possession, to return all the personal properties attached
in this case to the owner/s thereof within one (1) week from the finality of this decision;

6. Dismissing defendants counterclaim for lack of sufficient merit.

No pronouncement as to costs.

SO ORDERED.[5]

In time, respondent Advance Capital Corporation appealed from the decision to the Court of Appeals.[6]
On 30 September 1997, the Court of Appeals promulgated a decision reversing that of the trial court, the
dispositive portion of which is set out in the opening paragraph of this decision.
Hence, this appeal.[7]

The Issue

The issue raised is whether there was dacion en pago between the parties upon the surrender or transfer of
the mortgaged buses to the respondent.[8]

The Courts Ruling

We deny the petition, with modification.

The issue raised is factual. In an appeal via certiorari, we may not review the factual findings of the Court
of Appeals.[9] When supported by substantial evidence, the findings of fact of the Court of Appeals are
conclusive and binding on the parties and are not reviewable by this Court, [10] unless the case falls under any of
the recognized exceptions to the rule.[11]
Petitioner failed to prove that the case falls within the exceptions. [12] The Supreme Court is not a trier of
facts.[13] It is not our function to review, examine and evaluate or weigh the probative value of the evidence
presented.[14] A question of fact would arise in such event.[15]
Nonetheless, we agree with the Court of Appeals that there was no dacion en pago that took place between
the parties.
In dacion en pago, property is alienated to the creditor in satisfaction of a debt in money. [16] It is the
delivery and transmission of ownership of a thing by the debtor to the creditor as an accepted equivalent of the
performance of the obligation.[17] It extinguishes the obligation to the extent of the value of the thing delivered,
either as agreed upon by the parties or as may be proved, unless the parties by agreement, express or implied, or
by their silence, consider the thing as equivalent to the obligation, in which case the obligation is totally
extinguished."[18]
Article 1245 of the Civil Code provides that the law on sales shall govern an agreement of dacion en pago.
A contract of sale is perfected at the moment there is a meeting of the minds of the parties thereto upon the thing
which is the object of the contract and upon the price.[19] InFilinvest Credit Corporation v. Philippine Acetylene
Co., Inc., we said:

x x x. In dacion en pago, as a special mode of payment, the debtor offers another thing to the creditor who
accepts it as equivalent of payment of an outstanding obligation. The undertaking really partakes in one sense of
the nature of sale, that is, the creditor is really buying the thing or property of the debtor, payment for which is
to be charged against the debtors debt. As such, the essential elements of a contract of sale, namely, consent,
object certain, and cause or consideration must be present. In its modern concept, what actually takes place in
dacion en pago is an objective novation of the obligation where the thing offered as an accepted equivalent of
the performance of an obligation is considered as the object of the contract of sale, while the debt is considered
as the purchase price. In any case, common consent is an essential prerequisite, be it sale or novation, to have
the effect of totally extinguishing the debt or obligation.[20]

In this case, there was no meeting of the minds between the parties on whether the loan of the petitioners
would be extinguished by dacion en pago. The petitioners anchor their claim solely on the testimony of
Marciano Tan that he proposed to extinguish petitioners obligation by the surrender of the nine buses to the
respondent acceded to as shown by receipts its representative made. [21] However, the receipts executed by
respondents representative as proof of an agreement of the parties that delivery of the buses to private
respondent would result in extinguishing petitioners obligation do not in any way reflect the intention of the
parties that ownership thereof by respondent would be complete and absolute. The receipts show that the two
buses were delivered to respondent in order that it would take custody for the purpose of selling the same. The
receipts themselves in fact show that petitioners deemed respondent as their agent in the sale of the two vehicles
whereby the proceeds thereof would be applied in payment of petitioners indebtedness to respondent. Such an
agreement negates transfer of absolute ownership over the property to respondent, as in a sale. Thus, in
Philippine National Bank v. Pineda [22] we held that where machinery and equipment were repossessed to secure
the payment of a loan obligation and not for the purpose of transferring ownership thereof to the creditor in
satisfaction of said loan, no dacion en pago was ever accomplished.

The Fallo

IN VIEW WHEREOF, the Court DENIES the petition and AFFIRMS the decision of the Court of
Appeals[23] with MODIFICATION as follows:

WHEREFORE, the appealed decision is hereby REVERSED and SET ASIDE. In lieu thereof, judgment is
hereby rendered ordering defendants-appellees to pay, jointly and severally, plaintiff-appellant Advance Capital
Corp. the following amounts:

(1) P16,484,994.42, the principal obligation under the two promissory notes plus 12% per annum from the
finality of this decision until fully paid;

(2) P50,000.00 as attorneys fees;

(3) Costs of suit.

All other monetary awards are deleted.

SO ORDERED.